News

Why there are long car waiting periods in India

Brands like Toyota are not usually known for such tactics but the latest Innova Hycross crossing (no pun intended) 1.5 years of waiting is unbelievable.

BHPian Bit recently shared this with other enthusiasts.

Modern solutions come with modern problems!

Gone are the days when you could just walk into a showroom with a bag full of money and walk out with your shiny car. A waiting of up to 3-6 months has become a norm with some models even touching an unprecedented 1-2 years (looking at you Mahindra/Toyota).

This brings an interesting question: What actually is driving such a huge waiting period in modern times? The common sense comes with the reasonings:

  • Demand and Supply: There are just too many of us car buyers and companies simply do not have the manufacturing capacity to deliver them. Is everyone rushing to buy a car like there's no tomorrow?
  • Chip Shortage: This mostly affects the higher-end variants. Post-COVID, there was chaos in sourcing electronic components used in higher variants and all manufacturers were crying about chip shortage. Does it still prevail?
  • Plain Jane Marketing: The companies just want to "show off" the waiting period to keep their product warm.
  • Something else…

However, I have a problem gulping the reasonings.

If it's about demand/components shortage, how is one OEM (MG for example) able to provide electronics-rich features readily when other OEMs (Mahindra) can not?

...And then we have brands like Toyota that are not usually known for such tactics but the latest Hycross crossing (no pun intended) 1.5 years of waiting is unbelievable.

And finally, we have an exceptional example in the form of THAR RWD Diesel. This car defies all reasoning about the waiting period. It definitely can not be attributed to the components shortage considering Mahindra is able to deliver the 4x4 in a relatively much shorter time. In an ideal world, just removing some component (4x4 gear) should result in REDUCING the waiting period instead of increasing it by 1 year!

And if it all is just a marketing ploy, isn't this a visible business loss? If I had the capacity to supply, artificially restricting it and selling less volume wouldn't make any business sense to me. Gaining some warm word of mouth at the loss of actual sales in units and money doesn't make financial sense to me… unless I'm missing something.

BHPians please shed light on this.

Here's what BHPian Nithesh_M had to say about the matter:

Both import chips from Chinese vendors (some local manufacturers have proxy vendors who do it for them so they can claim it's all manufactured here).

While the chip shortage is or was real, brands like MG who are based out of China probably have better resources in obtaining chips from their Chinese vendors vs say local brands that have to clear the Chinese export redtapes. On the other hand, Korean and Japanese brands have better vendor support from Indian suppliers for interior trim parts than European or even local manufacturers. It's all about setting up good quality vendors for the long term.

It's not that simple. There either needs to be a separate assembly line for only the RWD variant or as I suspect there is an assembly line common for both the RWD and AWD variants. That means for every 100 AWD they assemble they probably can get 5 to 10 RWD variants manufactured. Demand vs supply basically.

If you had the ability to sell 100 kg worth of products for a fixed price of Rs 200 per kg, would you sell it all at once immediately?

Or would you sell it in small batches of say 10kg each at Rs 210 per kg in the first year and keep the rest for more batches with price per kg hiked up by 30% every year? At the end of the 10th year, you'd sit on more money than if you had made by selling it in one go. That's a minimum 300% profit with reduced overheads and other expenses cut down due to low volumes.

Here's what BHPian Dr.AD had to say about the matter:

I think this is the main reason. It is the age-old truth, and demand and supply drives the automobile industry even more so than many other industries.

For example, many manufacturers with a production capacity of 4000 to 5000 cars per month are getting bookings worth 10 months of production right at the launch. And over the next 1-2 years, the bookings only continue to increase. This instantly leads to waiting periods of 10 months to a year or even more.

Further, car manufacturing being so capital intensive, it is not possible to ramp up production at will. It would be a logistical challenge to ramp up or ramp down production based on demand cycles. The whole supply chain is a very complex business operation. Therefore, many OEMs play it safe in planning the production capacity to begin with. It is much better to have more demand than you can cater to, than having excessive production capacity and unsold inventory. That latter is a financial disaster. So they play it safe and build production capacity which they are almost sure to sell. And then when the demand is much higher, it is not feasible to increase production capacity quickly. If the OEM sees consistently high demand for more than a year or so, they do try to add more production capacity. But it does take time to build that. So overall, waiting periods are a result of this.

I believe this simple age-old demand-supply logic, with the fact that the production of automobiles is not something the OEMs can ramp up or down at will, is the main cause of waiting periods for the popular models.

Chip shortage etc is secondary. In fact, coming to late 2023 and now early 2024, except for the high-end graphics cards and AI chips, the chip shortage for many other chips is more or less resolved. I do not believe that is an issue for automobile manufacturers in India any more.

Here's what BHPian vattyboy had to say about the matter:

It's option 3 - "Plain Jane Marketing".

In Surat, I have been in the market for the last 2 months in search of a new car and in every brand the car was available in stock like Xuv700, Creta, Elevate and Taigun if I agreed to buy in their conditions like their insurance rate, some amount of accessories and extended warranty.

All this is done to avoid giving discounts to the customers and to increase the profit margin of their dealers.

Companies are doing this to show that their cars are successful.

Check out BHPian comments for more insights and information.

 
Live To Drive